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An Assessment of the Financial Sustainability of the Electricity Sector in Rajasthan

This report examines the performance of the electricity sector in Rajasthan, assessing its ability to recover operating costs, reliably meet demand, make investments and operate according to environmental and social norms.

Rajasthan’s electricity sector is going through a period of transformation, with the expansion of renewable energies, the appearance of private actors in power generation, and the need to expand transmission and distribution networks to achieve universal electricity access.

This report shows that, as new generation capacity is being brought onstream, the level of reliability is generally improving and more consumers are being connected to the grid. However, these improvements result in increasing costs for distribution companies (discoms)—costs that are not met by a corresponding increase in revenues, due to a long-standing inability to raise electricity tariffs. As a consequence, discoms have increased their dependence on fiscal transfers from the government.  

The report concludes that the single biggest power sector challenge for Rajasthan is to attain financial viability for the discoms by covering the costs of power generation and distribution from the sale of electricity—especially when considering the large opportunity costs in terms of spending on other developmental priorities.